Canadian dollar extends gains amid disappointing U.S. consumer spending data
TORONTO - The Canadian dollar closed higher Thursday amid mixed commodity prices and a tepid read on American consumer spending.
The loonie was up 0.25 of a cent to 93.52 cents US.
The greenback declined after the U.S. Commerce Department reported that consumer spending rose 0.2 per cent last month after no gain in April, missing expectations for a 0.4 per cent rise.
The data was an unpleasant surprise as consumer spending accounts for 70 per cent of the American economy.
And the numbers came out a day after another report showed that the American economy contracted in the first quarter by 2.9 per cent, larger than the two per cent contraction economists had expected. The numbers were largely shrugged off as the performance was tied to severe winter weather.
But BMO Capital Markets says that while it sees an improvement for the second quarter, it's now looking at annualized growth of around three per cent, down sharply from earlier estimates of 3.8 per cent growth.
U.S. incomes rose a solid 0.4 per cent in May, which met expectations, after a 0.3 per cent April gain.
Meanwhile, an inflation gauge thatâ€™s closely monitored by the U.S. Federal Reserve has risen 1.8 per cent over the past 12 months, the fastest rise since late 2012, but still below the Fedâ€™s two per cent target.
Oil prices were lower as fears diminished somewhat over supply disruptions from Iraq with the August contract down 66 cents to US$105.84 a barrel.
September copper was up a cent at US$3.17 a pound, while August bullion faded $5.60 to US$1,317 an ounce.
The loonie has been on a roll recently, up about 1 1/3 cents US over the past week to a six-month high as gold and oil prices have risen amid geopolitical concerns centred on a rising insurgency in Iraq and tensions between Ukraine and Russia.
The loonie had also found support from stronger than expected inflation data, which raised expectations that the Bank of Canada could raise interest rates sooner than thought.
But analysts caution this rally will be difficult to sustain.
Oil price increases have been driven by supply worries, not rising demand, which in turn could weigh on the American economy, said Camilla Sutton, chief FX strategist, managing director Scotiabank Global Banking and Markets.
Also, a downward revision in American economic growth would also affect Canadian expansion.
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